Transcript
Hello, everybody, welcome to Monday, quite a day today, the S&P 500 was down just about three quarters of a percent. But there was a lot going on behind the scenes, I spent the weekend digging through all of my signal portfolios and all the ETFs and all the different pieces that I do to try to figure out where things are going. And I will say, just for starters, that I think that the run that we’ve been on, in the clean energy, some of the other pieces in the innovative technology, and what have you have really deteriorated to the point where I think that run is over for now, for the most part, so I’ve gone through and made some new models and some new portfolios. We did those, we released those today. So every IRA and Roth IRA and 401k, that we have, is now completely in the new models, because we don’t have taxes to worry about. We then went by hand through all of the taxable accounts, and look for things that were down, that we could sell at a loss to kind of capture that loss, use that money to buy new pieces in the model, mostly short term bonds, as far as that goes for those particular accounts.
So we still have some clean energy pieces in the taxable accounts. Because some of those pieces are still up so much, one of our portions is still up an average of 96%. And, you know, if we just went through and sold that out, the taxes would be dramatic. So I do think clean energy has a future, just going to have to wind back through all of this, you know, situation that it’s in now. So the new portfolios are a little bit different. And I’ll describe some of those differences.
First of all, I’m using what’s called kind of an equal weight concept. So I have eight stock pieces and five bond pieces. And so everybody has the same 13 pieces is just a matter of how much so if you’re more conservative portfolio, you have more of the bond pieces, and more aggressive is more of the stock pieces. But those eight stock pieces, there’s a couple of key things, first of all, five of them are similar to things that we’ve had so far, because I don’t think that the you know, fourth industrial revolution is over. I think that, you know, we just have to pare back from where we were before. So we have online retail, we have a couple of innovative technology pieces, we have some semiconductor pieces, which are doing quite well right now. And so we have that. So that’s kind of like one piece. But then the other three pieces of the stock market portion of our portfolio, at least our model is kind of unique. First of all, the first piece is the whole market. Vanguard’s, you know, total stock market index, it’s basically all of the stocks here in the US. And one of the reasons to use that because there’s just so much emotion going on right now that it’s better to be a little bit broad. As far as that goes.
The second piece is the value portion of the S&P 500. So if you divided it into Value and Growth, this is the Value part that was actually up today about .6%. So that was really great. You know, we didn’t make today all of these returns that I’m talking about, because we were transitioning into this portfolio. But the third piece of that, you know, portion is an inverse portion. And what it does is in this particular case, it goes the opposite direction of the S&P 500. So the S&P 500 was down .77%. And this inverse position was down .82. So it’s usually pretty close to kind of I mean, sorry, up .82, it’s usually pretty close to you know where where that is. And I don’t usually use an inverse. But this relates to the next portion of the conversation, which is just really, that the bond market is not really working the way it used to. Because the rates are so low, they’re not really going up when the market goes down, like they did in February, March of last year. And so that’s why I have an inverse position in the stock portion of the portfolio to kind of act like the bond portion. So if this market does continue to deteriorate, we’ll have something to slow it down. And I can add another piece if things really start to go. So the bond portion has really struggled because now interest rates are starting to come up. And when they come up, you know the value of bonds go down. And so what we’ve done there is we have three of those five pieces are in very short term bonds. And that handles interest rate increases much better. We have two of them are Treasury and one is a short term, high yield. And then we have two high yield pieces, which generally do well in higher inflationary environments. And so you know, those are the pieces that we’ve got. And we’ve gone through and made these transactions. You’re going to see all this come through.
I apologize for all transactions. But one of the things that’s happening right now is this market has drastically changed last year because of the virus and it’s really kind of drastically changing back. We have seen several fake moves of this change back. This one seems different to me, I’m looking at these charts, and I’m seeing stuff that he didn’t see in the last 12 months. And this is the first time that this rotation to value, for example, happened, you know, after we’ve had a vaccine. And, you know, again, the Dow was up today, which is more of a S&P value index, the S&P and the NASDAQ are down, which are more growth indexes. So it kind of tells you, you can see what’s happening. I don’t know if it’ll continue. That’s why we have a barbell approach, we have plenty of growth pieces still left if the market does well, like it did on Friday. So it’s possible that that continues, and then plenty of Value and inverse pieces in case the market is rotating towards those or struggling and falling. And so I’m actually really excited about this, I think this is going to be a great change. We’ve had a great, you know, really two year run here. And I just want to keep that rolling. And I think that, you know, some adjustments are going to be needed as the world starts to slowly get back to normal. And again, you know, it hasn’t gotten back to normal yet, the expectation is that it will, and the market is signaling that expectation because it looks ahead, you know, six to 24 months. So what what’s happening right now, if you look at the market is telling us things are gonna get back to normal here inside that timeframe. And that’s the prediction. So we’ll see how that works out. So very excited. I hope to be able to talk to you tomorrow. Thank you very much.